Magazine

Bush's Econo Crew: Time to Call for Backup?

October 27, 2002

George W. Bush can be more stubborn than sagebrush, especially when it comes to sacking a wayward team member. The best way to ensure that he never fires a lieutenant is for a Democratic critic to call for that official's ouster. Examples of the President's reluctance to hand out pink slips abound. There's Army Secretary Thomas E. White, whose dealings as an Enron Corp. exec fueled calls for his firing. He's still on the job. So is Securities & Exchange Commission Chairman Harvey L. Pitt, whose repeated gaffes led Senate Majority Leader Tom Daschle (D-S.D.) and House Minority Leader Richard A. Gephardt (D-Mo.) to demand his scalp. While Bush can't fire Pitt, an independent regulator, a signal of displeasure could cause the embattled SEC head to fall on his sword. But even if Bush wanted Pitt out, the President's friends say he's inclined to hold off now to spite the Democrats.

Still, the drumbeat isn't stopping. On Oct. 10, Daschle and Gephardt demanded a purge of the Bush economic team. Insisting it's time to "clean house," Daschle derided the current econo-crew's advice as running the gamut "from bad to worse." So, does this latest salvo mean the President's economic brain trust looks solid for the foreseeable future?

Maybe not. While Bush is loath to have his fractious advisers depart at his behest, Wall Street and Washington are abuzz with talk of changes to come after the midterm elections--if only to drive home the message that the White House needs to show it cares as much about the economy as it does about overthrowing Saddam Hussein. Although his advisers won kudos for the lobbying that led to the big tax cut in 2001, since then, the crew has often seemed behind the curve when dealing with the sickly expansion.

The rumor-mongers may be on to something, even if Bush doesn't make his economic advisers walk the plank. Instead, some topsiders may jump ship in 2003 on their own, citing factors as diverse as exhaustion, political ambition, and weariness with Washington's blame game.

Given the remarkable constancy of the Administration's "tax-cut and spend" economics, why should anyone pay heed to speculation about changes on the economic team next year? Simple: The economy may need an A-Team to weather 2003's storms. If the recovery flatlines in the first quarter and Bush is preoccupied with Iraq, the economic crew may have to cobble together a new stimulus package--without the internal wrangling that has slowed the current team's reflexes.

Most current speculation centers on outspoken Treasury Secretary Paul H. O'Neill, a former Alcoa Inc. CEO who is often out of step with colleagues. O'Neill aides insist he is "energized" and raring to kick off a new tax-reform push. But longtime friends of Bush describe O'Neill as a liability and predict that he'll tire of the sniping and leave. The Treasury chief has managed to alienate White House pols, Bush friends, and supply-siders by publicly voicing his eclectic personal opinions. And while he's still a boardroom favorite, O'Neill long ago lost backing on Wall Street because he presides over a team that pales in comparison to Bush's all-star War Cabinet.

What's more, O'Neill is considered too erratic to be a reassuring economic spokesman, something Bush badly needs in the face of lingering economic malaise. Indeed, some White House pols are pushing Commerce Secretary Donald L. Evans to replace the Treasury chief at the microphone, hoping that might boost consumer and investor confidence.

So will O'Neill walk? "My gut tells me he's leaving," says an outside adviser to Bush. "The real chore now is figuring out who'll replace him." That won't be easy because the President may not be able to turn to Wall Street for candidates. Most top financial execs are under fire in the corporate crime saga, dodging charges of suspect initial-public-offering allocations, shady stock research, and conflicts of interest. "There's not a single person with Wall Street experience who isn't tainted--to my mind, legitimately," says the adviser.

That's a bit of an exaggeration, but clearly, finding a white-hat figure among Wall Streeters and investment bankers has become nearly impossible in the current climate. Still, the rumor mill is buzzing over New York Stock Exchange Chairman & CEO Richard A. Grasso, whose pro-reform appeals might soothe investors. Some capital consultants muse about former White House Chief of Staff Howard H. Baker Jr., currently Ambassador to Japan. He's a genial consensus-builder, but conservatives consider him too moderate.

If all else fails, the White House might promote Commerce's Evans, a Bush pal and former independent oilman. Evans' low-key style and rigorous adherence to the Administration script are viewed as pluses inside Team Bush. Yet he's hardly an ideal choice. He is not well-versed in economics or global finance. "He's a good soldier and a nice face on TV," says one Bush official. "But every question he gives his staff is: `Has the White House seen this, and what do they want us to do?"'

Of course, just because Evans made his millions hunting for Texas crude hardly means he's a hayseed. Former Secretaries James A. Baker III and Lloyd M. Bentsen, both Texas pols, cut a big swath through the job. But both had Washington experience and sharp elbows; Evans doesn't. Indeed, Evans is a gun-shy man who is comfy at Commerce, where he relishes road trips that extol free trade. "He's resisting" being pushed deeper into policymaking, says one Republican insider.

If Evans balks at a move, Bush could be over a barrel. The President might have to consider Texas Senator Phil Gramm, who plans to burnish his credentials by signing on as vice-chairman at investment bank UBS Warburg (UBS). The scrappy conservative would surely avoid O'Neill's tendency to wander across the ideological map. But his head-butting could cost Bush on Capitol Hill. And his wife, Wendy, is an ex-Enron director, controversial in her own right.

Treasury isn't the only slot the White House has to worry about. Chief economist Lawrence B. Lindsey won kudos early on for predicting the Big Bust and repackaging Bush's $1.6 trillion tax cut as "recession insurance." And he's a solid analyst. But Lindsey runs a tiny White House National Economic Council that's had a lot of trouble coordinating policy. Also, his ultra-bearish views make him the Vincent Price of economics--too scary to appear regularly on TV.

When it comes to the short-term outlook, "Lindsey is the gloomiest I've ever seen him," says an associate. That pessimism consistently drives the onetime Fed governor to push for short-term stimulus, only to be told by O'Neill that the ideas are too costly or too ill-timed. Not surprisingly, Lindsey has been musing about returning to his lucrative consulting business. But Bush might be reluctant to have Lindsey, whose ability to fuse economics and politics he values, head for the exit. If he leaves, Council of Economic Advisers Chairman R. Glenn Hubbard, a savvy tax economist who has been partially eclipsed by Lindsey, would likely play a larger policy role.

Office of Management & Budget Director Mitchell E. Daniels Jr. is another Bush favorite and a rising star. But the tug of politics may lead the ex-Reagan political director to head home. Indiana GOP leaders are pressing Daniels to mount a 2004 governor's run. "He needs to make a decision early," says one state pol. If Daniels moves on, Bush could turn to Federal Trade Commission Chairman Timothy J. Muris or G.William Hoagland, Republican staff director of the Senate Budget Committee. Both are able numbers-crunchers and would garner bipartisan support.

Of course, with an Iraq showdown looming, dealing with wholesale shifts in his economic team isn't at the top of the President's to-do list right now. "Wartime is not the time" for a shakeup, cautions one Bush adviser. "When the Commander-in-Chief gives an order, you don't leave your post."

That may be true over at the Pentagon. But Bush may have no choice but to rush in economic-policy reinforcements in 2003. So if the Commander-in-Chief emerges from the White House Situation Room and still finds economic wreckage on the horizon, don't be surprised to see some new faces at key Administration posts. The unanswered question: Will new ideas follow? By Lee Walczak, Richard S. Dunham, and Rich Miller, with Paul Magnusson, in Washington